Are you ready for ERP?

I just came across promotional advertising from an ERP vendor offering a few licenses for a very low price. While this sounded like a very good offer, a closer inspection of what was included presented a few questions worth asking.

Digging into the "terms & conditions", I discovered that this offer excluded many of the required components to run their system. I thought to myself, how can this vendor maintain their investment in R&D and offer the long-term commitment needed to support their customers?

Before jumping into deals that seem too good to be true, it's important to do your research and ask ERP and Business Intelligence (BI) vendors the right questions to gain a better understanding of what the total cost of ownership (TCO) will be.

I have compiled a list of elements every business should ask before signing up on any ERP offering:

1. What does the listed price include?

Ask for an outline of exactly what level of service you will receive from the vendor and compare this to others on the market.

2. What level of service does the package include?

The cost of the application licenses is only one component of the total cost of an ERP solution. A promotional price may not actually include infrastructure costs (O/S, database, portal, network, etc.), upgrades, access to online resources and implementation services.

3. Calculate your total cost of ownership

To know your total cost of ownership (TCO), you should also add the internal resources allocated to the project. If you add it all up, the saving on a handful of licenses is not that significant.

For an ERP implementation to be successful and cost-effective, it is important to look at the full picture, agree on a budget and timing with the vendor, and ensure that it will solve the IT pains that triggered the decision to change your business management software in the first place.

4. Evaluate your relationship with the software vendor

Your relationship with the software vendor should be a long-term partnership as their ERP product will be the central nervous system of your business for the next 5-10 years. If you rush into a deal that locks you in to this system before understanding the company and how it operates, it could be a recipe for disaster. Partnerships are about trust, honesty, working together and nurturing a relationship that is beneficial for both parties.